Calm Has Replaced Fear in the Bond Market

Calm largely returned to the bond market in July following a bout of turbulence in June. Volatility declined across the broad spectrum of fixed income assets, with interest rates and credit spreads falling from their highs, in some cases dramatically. Flows have also turned positive in many market segments, particularly for high yield and bank loan securities.

This shouldn't come as a surprise. PIMCO believes the turbulence was built more on technical factors than fundamental ones, with pipelines becoming clogged by...